Covered Bonds

A big rise in issuance from Spain has helped push Crédit Agricole CIB to the top of Dealogic’s covered bond bookrunner table for €500m-plus deals for the first time. Bankers say reciprocity has played a big part in the rise and fall of many banks in recent years.

Crédit Agricole Home Loan SFH on Thursday became the first covered bond issuer to brave the euro market this week, selling a €250m tap of a 12 year bond after receiving strong enquiry from German accounts.

Cédulas Hipotecarias could be hit by a European Union court ruling on Spanish mortgage enforcement, according to rating agency DBRS. The ruling increases the likelihood of borrowers contesting mortgage enforcement proceedings, which could increase the foreclosure period, it said.

UBS and Swedbank announced dollar benchmarks on Thursday, opting for the safety and favourable cross currency swap available in that market.

Italian covered bond spreads held firm following a round of Fitch downgrades, which came after the rating agency tightened the link between issuer and covered bond ratings in the country.

Final political agreement on the Capital Requirements Directive has been reached, the European Covered Bond Council’s plenary session in Rome heard on Thursday. However, there was heated argument over which covered bond assets should be eligible, the session heard.

High redemptions, combined with deleveraging and a drive towards deposit funding has put net first quarter covered bond supply in 2013 on track to hit record lows, said Barclays analysts on Thursday.

Moody’s assigned Kiwibank’s covered bonds a triple-A rating on Wednesday, and bankers expect it to open books on a debut Swiss franc transaction later this week.

The newly updated covered bond map from The Cover, in conjunction with Goldman Sachs and EuroWeek, is now available online and in hard copy.

Overcollateralisation should not be the main factor when rating agencies assess covered bonds, according to Commerzbank.

Core and peripheral borrowers are waiting for a better market before bringing benchmark covered bonds. Safe-haven names are traditionally first to take advantage of returning stability. But southern European borrowers, which offer higher yields, juicers spreads and are less flexible over pricing, will find execution easier, said bankers.

Covered bonds should be exempt from the proposed European financial transaction tax, the Association of Danish Mortgage Banks (Realkreditrådet) has said, as it could raise mortgage costs in Denmark and hurt liquidity across bond markets.